Kishan Pillay and Ngqondi Nxokwana addressed the South African Oil and Gas Alliance’s (SAOGA’s) networking breakfast at the IDC in Sandton recently. Under the leadership of Niall Kramer, SAOGA’s CEO, the two men spoke of the need for, and development of, an infrastructure to make liquid natural gas (LNG) available to a wider market in South Africa.
Pillay is the director of upstream and midstream oil and gas, from the DTI’s Industrial Development division; and Nxokwana is the section head for petrography services at the Council for Geoservices.
Getting ready for gas
Pillay said that South Africa is getting ready for gas, but the public is still needs to be educated regarding the proper and safe use of gas. The supply of gas, Pillay, says will come either from foreign gas fields or local fracking fields.
Pillay says that pricing is very important: gas demand moves in the opposite direction to the movement of prices, he says.
According to Pillay, fact-based data (as opposed to emotional-based data) must be collected and used to determine a realistic expectation of the future demand for gas in South Africa.
Major markets for gas
He predicts two main areas of demand for gas: industry and transport. These two are expected to consume 47 PJ in about 15 years’ time, up from 24 PJ in the short term. For comparison, he says that South Africa uses about 1,5 PJ of liquid petroleum gas (LPG) currently.
To supply these two main markets with the gas they are expected to need in 2032, gas reserves of 43 bcf (about 0,85 million t) of natural gas will be required per year.
Sensitivity of demand to gas prices
Pillay said that the reason LPG usage is so low is because at US$10 – $14 per MMBTU, there are cheaper options. Coal apparently costs about $2,5 per MMBTU. Thus, he said, LNG will need to be available to industrial and transport companies at prices no higher than $7 per MMBTU. He says that should the price of gas increase from $6 to $10 the demand could fall off by as much as 80%.
There is a levy of R,48/l on gas at present which could dampen by as much as 10% demand, he said.
Gas in transport
Converting petrol- and diesel-powered vehicles to run on LNG is relatively easy but will require considerable effort on the part of the government and incentives to make it attractive. Public commuter transport is a good place to start, Pillay says, because of the high adoption rate. However, electric vehicles may overtake gas-power at the rate things he going he said, which would change the demand curve significantly.
Timing is very important, he said, since building a country-wide gas infrastructure will take decades.
Nigel Gwen-Evans a director in the Department of Economic Development, Western Cape Government, said that at present, South African gas companies are focusing on sub-Saharan suppliers including Mozambique, Uganda and Tanzania. Fracking in the Karoo is still an option and may yet take place, he said.
Nxokwana said that the Department of Geosciences has laboratory facilities which include helicopters, boats, drilling equipment, etc. He said that there is a ten-year programme to create a high-resolution map (1:50 000 scale) of the country upon which will be shown the country’s mineral wealth. The Department is working in conjunction with Mintek, PASA, and a number of academic institutions.
Nxokwana said the shale gas “sweetspot” is in the Beaufort West area. He says a 3000 to 4000 m deep well should be drilled there in February 2018 because, according to the Department’s studies natural gas could be present at these depths. Apparently, the Department of Geosciences is working in conjunction with the Department of Mineral Resources in the planning of this exploration. Nxkwana said the initial drilling will be for data: to collect accurate information from the ground, not for oil or gas.
Nxokwana said that the exploration and any subsequent development would benefit the local community enormously. Jobs would be created and the nearby towns would develop quickly.
Answering a question from a member of the audience about the water supply in the region where this exploration is to take place, Nxokwana said that one must consider the need for food, energy and water in any community, and that if water is needed to create jobs (which will buy food) and energy, then water must be used. Kramer added that studies appear to show that there may be water at those depths which could be used for the fracking process. He added that if necessary, water could be brought into the area by truck or pipeline.
Ultimately, he said, finding gas in the Karoo could make South Africa less reliant on imported oil and change the lives of millions of local people.
Kxokwana said that other technologies are emerging too: a technology using nitrogen-gel has been proposed but is as yet untested. Also, waterless fracking systems are apparently being developed, he said.
Although Kramer said that the IPP office will oversee the gas project, he was unclear about the way in which gas take-off will be handled.
The speakers indicated that a gas resource would support future renewable energy sources, such as wind and solar, to smooth out the valleys in supply when the wind drops after sunset. Although gas is a fossil fuel, it burns without emitting particulates, produces less CO2 than coal, and can be used at site or transported to where it’s needed, the speakers said.
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